- Land/Building Acquisition
- Construction/Tennant Improvements
- Business Acquistion
- Business Debt Refinance
- Machinery and Equipment
- Furniture, Fixtures, and Equipment
- Working Capital
Special note: As of the writing of this post and per the provisions of the American Recovery and Reinvestment Act of 2009, the SBA guaranty on new 7a loans can be raised to a maximum of 90%.
Term to Maturity:
Depending on the primary purpose of the loan, its term to maturity generally ranges from 7 to 25 years. 7a loans are fully amortized through maturity with no prepayment penalties for loans with less than a 15-year term. Loans with a term of 15 years or more come with a 3-year declining prepayment penalty; a 3% prepayment fee in year 1, 2% in year 2, and 1% in year 3.
Typically, 7a loans are variable rate loans, adjusted calendar quarterly. Interest rates are set at a margin above the Wall Street Journal Prime Rate; within a range of WSJ Prime Rate + 2.00% (presently 5.25%) to WSJ Prime + 2.75% (presently 6.00%).
Tip: When developing financial projections for your business and estimating your monthly loan payments, assume your SBA loan will be priced at the maximum = Prime + 2.75%.
The SBA guaranty fee for a 7a loan is paid by the borrower and is as follows:
- 2% of the guaranteed portion of the loan for all loans $150,000 or less -- For example, the guaranty fee on a $100,000 loan with an 85% guaranty would be 2% of $85,000 or $1,700
- 3% of the guaranteed portion of the loan for all loans $150,001 to $700,000
- 3.5% of the guaranteed portion of the loan up to $1,000,000, PLUS 3.75% of the guaranteed portion of the loan over $1,000,000, for all loans $700,001 to $2,000,000 -- For example, the guaranty fee on a $2,000,000 loan with a 75% guaranty ($1.5 million guaranteed portion) would be 3.5% of $1,000,000 ($35,000) PLUS 3.75% of $500,000 ($18,750), which totals $53,750
SBA 7a loans are comparatively flexible and the terms noted above make them a great source of financing for new business startups and small business expansions.